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Towards harmonising lower VAT rates

brussels bureau

Towards harmonising lower VAT rates


Lower VAT on dining out would suit France, but not other EU member states… The European Commission is calling on all of them to agree which goods and services should be eligible for lower than standard VAT rates.

Not all the members have permission under EU rules to levy less than 15 percent on local labour-intensive services or goods. But EU tax law can only change if all the members agree.

Tax Commissioner Laszlo Kovacs has put forward a law seeking uniformity and an end to temporary exemptions: “The reason is that currently there are 11 member states than can apply reduced rates on restaurant services which is not allowed in other 16 member states so there is a great deal of inequality.”

Analyst Juan Delgado, of the Bruegel think tank, looked at the plan: “It’s got also an economic impact. It helps those sectors that happen to be labour intensive, so you can promote the development of these sectors. But why these sectors and not others? I think the Commission has accepted this because the impact of reducing VAT in these sectors is limited, and does not affect trade between member states.”

Gardening is on the suggested five percent list, as well as construction, repairs, hairdressing, help for the aged – and more.

Taking drops in revenue into account, Kovacs said no country would be forced to levy reduced rates.

With social policy no longer in the draft, the commissioner thinks the law could be in effect by 2011 – if reticent countries like Germany can be persuaded.

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